ALEXANDRIA, Va.—The 10th Circuit Court of Appeals today revived NCUA's suit against Barclays Capital that claims the bank misrepresented more than $555 million in mortgage-backed securities (MBS) that led to the failure of Western Corporate FCU and U.S. Central FCU.
NCUA originally filed the suit in 2012, alleging that the two corporate giants failed as a result of bad MBS investments that performed poorly because of too many mortgage defaults. But one year later a district judge in Wichita, Kan., stated that NCUA had filed its case too late to recover any damages.
NCUA did not file suit until six months after its deadline—three years after the failed corporates were placed into conservatorship—but in a 15-page ruling released today, the appeals court sided with NCUA, writing that though the claims were filed past deadline, because Barclays agreed to a tolling agreement that excluded any statute of limitations, the suit could move forward.
"Thus, while it is true that NCUA's claims are outside the statutory period and therefore untimely, that argument is unavailable to Barclays because the NCUA reasonably relied on Barclays's express promise not to assert that defense," the court wrote.
NCUA spokesman John Fairbanks told Credit Union Journal the agency is pleased with the court's decision, which the regulator's legal staff is examining carefully. NCUA expects its litigation to continue, as it has recently scored other victories in related suits, including one in December in which a judge refused to dismiss an appeal from several major banks in a similar lawsuit.